Why do drug prices soar? Blame PBJs, PBMs, weak regulators, and CME

What do PBJs, PBM “black boxes,” industry friendly advisory panels, and CME (aka doctor training programs) all share in common? They’re blamed for contributing to Big Pharma’s skyrocketing prices—and it’s worth diving into recent reports on these disparate causes to understand how Americans got into such dire shape with the costs of their medical care.

Let’s start with peanut butter and jelly sandwiches and a little math. A jar of generic peanut butter might cost a bit more than a buck and change, with a jar of strawberry jam running about the same. Now if you buy them in a combined product—Smucker’s version is called Goober—it sets you back $3.49.

This pricing comes from Marshall Allen, a reporter for Pro Publica, a Pulitzer Prize winning investigative news site. He goes on to compare PBJs with a medication his orthopedist recently prescribed for him: Horizon Pharma’s Vimovo. It’s a non-steroidal anti-inflammatory drug (NSAID). Allen points out it also is little more than a combination of the pain-reliever naproxen (best known in the branded version Aleve) and the upset-stomach remedy esomeprazole magnesium (best known as Nexium). He could walk into a drug store and buy a month’s supply of both for $40.

But his pharmacy billed his health insurer $3,252 for that same 30-day dosage of Vimovo, a practice that health care economist Devon Herrick told Allen was a “scam.”

It’s a marketing method that Horizon defends: It claims that the two common ingredients are specially formulated and provide benefit to patients. It’s using this approach to rack up profits from its purchase of a longtime maker of ordinary drugs. Although the company has been ripped by the media and in a congressional hearing over its high-prices, Allen says it has mastered the Big Pharma system for jacking up consumer costs in stealth fashion.

In brief, the company spends money to ensure that an aggressive sales force hits doctors up to use the product by extolling its limited benefits while downplaying its therapeutic realities (experts told Allen that patients could get the same effect of Vimovo by taking one tablet each of naproxen and esomeprazole magnesium at the same time).

Further, Horizon gets prime payment for Vimovo because of Big Pharma middlemen, notably insurers and pharmacy benefit managers (PBMs). Their efforts, ostensibly expense controls on behalf of insurers and companies that pay for their workers’ health insurance, have come under increasing fire because the middle men seem to be making healthy and growing profits without curbing costs.

PBM ‘black boxes’

Here’s where it’s worth skipping over to reporter Linette Lopez’s dive into the “black box” of PBMs and Big Pharma pricing and distribution, specifically with Acthar. It’s a new drug from Mallincrokdt that may be useful in treating muscular sclerosis, rheumatoid arthritis, infantile spasms, and certain eye conditions. It seems to be a versatile medication but it carries a steep $38,000 per vial price tag.

Lopez says the drug maker recently disclosed on an investor call that Acthar’s high cost is tied to its dealings with Express Scripts, the giant PBM. Details of their relationships aren’t disclosed or clear. But Express, as PBMs typically do, might negotiate on behalf of insurers and companies a rate for a drug like Acthar. It gets an undisclosed cut or rebate of this discount. In turn, it puts the medication on its accepted list of drugs. This list is used by doctors whom insurers will allow patients to see. Express and other PBMs also have expanded their business. They also, as Lopez explains, control distribution of drugs, negotiating with vendors (pharmacies and drug stores) on cost, availability, supply, and display. Again, PBMs collect fees for their work in all these areas. And the costs to patient-consumers soar as more and more hands are involved in transactions that aren’t publicly visible or recorded.

Big Pharma-friendly ‘oversight’

Where are regulators, lawmakers, and doctors as all this occurs?

As the Kaiser Health News Service has found, President Trump—despite his attacks on Big Pharma as “getting away with murder” on prices—appointed an industry-friendly advisory panel and has permitted it to work in secret. The group has a draft bill, supposedly to help reduce prescription medication costs. But it just echoes exactly what Big Pharma has wanted all along: A major relaxation of regulations on the industry. Indeed, sector leaders have thrown record amounts at lobbying the White House and Congress—and Big Pharma is cruising to winning its way on the top items on its legislative and regulatory agenda, reports Stat, an online health information site.

Where are doctors in the drug pricing mess? Allen points out that his doctor, who does not take gifts or payments, say, like speaking fees, from Horizon, was unaware of the high cost of the drug he prescribed for his patient’s shoulder woes. He leaves billing issues to his office staff, he said. Allen’s doctor said he might reconsider the med, now that he knows its price.

Adriane J. Fugh-Berman, a Georgetown University pharmacology and physiology prof, founded PharmedOut a decade ago as a project to try to pry CME programs from Big Pharma’s grip, including its domination of expert speakers, programming, and, yes, even providing free lunches during drug maker-sponsored seminars.

Her work has shown her how deep and insidious Big Pharma’s reach into medicine has become, including when senior doctors engage in “pimping” with interns and residents, interrogating them with questions about drugs, their brand names in this country and abroad, and their molecular formulation. This hazing doesn’t benefit patient care but it does put pharmacology front and center in young doctors’ minds as to what’s truly important in medicine, the professor said.

People interested in learning more about our firm's legal services, including medical malpractice in Washington, D.C., Maryland and Virginia, may ask questions or send us information about a particular case by phone or email. There is no charge for contacting us regarding your inquiry. A malpractice attorney will respond within 24 hours.

All contents copyrighted 2015 Patrick Malone & Associates except where copyright held by others. Reproduction in any form prohibited except where expressly granted.